Dollar Gains Ahead of CPI, Yuan Falls as China Considers Allowing Currency to Weaken
The dollar gained against European peers on Wednesday ahead of a highly anticipated reading of U.S. inflation, also boosted by a Reuters report China was considering allowing a weaker currency next year which sent the yuan and other Asian currencies lower.
The euro was last down 0.18% at $1.0508, a day before a European Central Bank meeting, and the pound shed 0.16% to $1.2752 as traders awaited U.S. CPI data, which will be released at 1330 GMT.
Economists expect both headline and core consumer prices to have risen 0.3% in November from previous increases of 0.2% and 0.3%, respectively.
Traders currently assign 85% odds to a quarter-point rate cut by the Fed on Dec. 18, but a higher than expected print could possibly disrupt these expectations, and concern about this was supporting the dollar on Wednesday.
The bigger movers on the story were naturally in Asia. The dollar jumped on the yuan, and was last up 0.24% against the offshore unit at 7.2780 and 0.23% higher on the onshore currency at 7.2491.
The contemplated move reflects China's recognition that it needs bigger economic stimulus to combat Trump's threat of bigger tariffs, people with knowledge of the matter said, according to the report.
China is expected to hold its annual Central Economic Work Conference, this week, after Monday's Politburo meeting vowed to switch to an "appropriately loose" monetary policy to spur economic growth.
China-exposed Antipodean currencies fell with the Aussie last down 0.3% to $0.6358 and the kiwi 0.3% lower at $0.578, after both touched on year lows after the report. Korea's under-fire won also dipped.
Japan's yen was in focus as well, strengthening after data showed Japanese wholesale inflation accelerated, supporting the case for a Bank of Japan interest-rate hike next week.
The dollar was last down 0.3% at 151.49.
In other central bank news, the Bank of Canada meets later Wednesday and the Swiss National Bank meets on Thursday just ahead of the ECB.
The BoC is seen as likely to cut by a half point which is helping to pin the loonie near a 4-1/2-year trough to the greenback. One U.S. dollar last bought C$1.4188 .
The Swiss franc held steady on the euro at 0.9289 to the common currency but softened on the strengthening dollar, which was up 0.15% on the franc at 0.8842. ,
Source : Reuters
